Globalization of arbitral procedure.

• Author: Kaufmann-Kohler, Gabrielle

TABLE OF CONTENTS I. IS ARBITRATION PROCEDURE GLOBALIZED? II. THE EVOLUTION OF THE LEGAL FRAMEWORK: A PARADOX A. National Law at the Place of Arbitration Governs the Proceedings B. Though it Governs, National Law Has Less Influence Over Arbitral Proceedings 1. The Seat of Arbitration is a Legal Fiction 2. National Laws are Increasingly Harmonized, Achieving Consensus on General Principles of Arbitration Procedure III. ARBITRATION PRACTICE: DOES A PROCEDURAL LEX MERCATORIA EMERGE? A. Instruments of the Procedural Merger 1. IBA Rules on Evidence 2. UNCITRAL Arbitration Rules 3. Institutional Arbitration Rules 4. Rules Set by Arbitrators B. Implementation of the Globalization and Standardization of Arbitral Procedure 1. Document Production 2. Oral v. Written Proceedings 3. Witnesses 4. Experts C. Remaining Divergence 1. Adversarial v. Inquisitorial Proceedings 2. Iura Novit Curia or is the Substantive Law Applied by the Arbitrator a Fact? IV. CONCLUSION: TOWARDS A GLOBALIZED ARBITRATION PROCEDURE I. IS ARBITRATION PROCEDURE GLOBALIZED?

Imagine attending hearings in three different arbitrations: one in Geneva, one in New York, and one in Hong Kong. All three hearings will likely involve the same hotel conference rooms, the same court reporters, the same language--English, the same types of oral submissions, witness examinations, expert presentations, and procedural arguments, and often even the same people. Does this mean that arbitral procedure is globalized (1)--that an arbitration is conducted in a uniform manner wherever it takes place, whatever national law governs? Does national law govern at all? This paper will discuss these issues.

Section II will review the legal framework of arbitration, be it found in international or national law, and its evolution over the last decades. Section III will examine current arbitration practice, seeking to determine whether an autonomous set of anational rules emerges, a sort of procedural lex mercatoria. Finally, Section IV will formulate a conclusion. With respect to scope, the present inquiry focuses on the procedural law or rules applied in arbitration, not on the law governing the merits of the dispute. (2) It is limited to the proceedings before the arbitrators and does not include ancillary court procedures, except to the extent that court decisions may impact the arbitrators' conduct of the arbitral proceedings.

2. THE EVOLUTION OF THE LEGAL FRAMEWORK: A PARADOX

   Two contrary findings arise from a review of the evolution of arbitration law over the last decades. On one hand, it is now commonly accepted that an arbitration is governed by national arbitration law of the place or seat of the arbitration, though not by local rules of civil procedure. On the other hand, such national law has less and less actual bearing on the arbitration proceedings. How does one explain this paradox?

   1. National Law at the Place of Arbitration Governs the Proceedings

      Conceptually, one can determine the law governing the arbitration proceedings according to the following two tests:

      * The subjective test refers to the intent of the parties, and builds upon the strong contractual component of arbitration. It implies that the arbitration procedure is subject to the law chosen by the parties to govern the arbitration, regardless of the place where the arbitration takes place;

      * The objective or territorial test refers to the place--in the legal meaning--or seat of the arbitration. It is based on the judicial component of arbitration and on the idea that arbitration proceedings resemble court proceedings, which are governed by the lex fori. Consequently, this test triggers application of the law of the place of the arbitration.

      Today, the objective test prevails, primarily because it is easy to implement and provides certainty. The UNCITRAL Model Law on Commercial Arbitration has adopted this test in its Article 1(2). Many countries have adopted the Model Law with changes or adjustments ranging from practically none (3) to very important. (4) The great majority of these states have adopted the territorial test of the Model Law. Others have made adjustments to allow for a mixed approach combining the objective test (place of arbitration) with the subjective test (parties' intent). (5)

      Among the states adopting the Model Law's objective test, Germany deserves special mention because the evolution of the law in that country is particularly telling. Under the so-called procedural doctrine or Verfahrenstheorie of the old Book 10 of the German ZPO, the parties were entitled to choose an arbitration law other than that of the place of the proceedings. For instance, they could agree to arbitrate in Germany under French arbitration laws. As a result, German arbitration rules, including mandatory and ordre public rules, would become inapplicable and the award would be considered foreign for purposes of enforcement in Germany. (6) They could also do the reverse, with the award rendered abroad under German law being deemed German and subject to setting aside proceedings in Germany.

      Pursuant to the present Paragraph 1025 ZPO, Book 10 applies if "the place of arbitration [] is situated in Germany." In other words, the procedural doctrine was abandoned. (7) A split between the place of arbitration and the applicable law is no longer allowed. (8) In the interest of "legal clarity," (9) German law has thus switched from a pure intent-based test to a strict territorial one.

      Many other statutes enacted over the last two decades, though not following the UNCITRAL Model Law, apply the territoriality principle as well. For instance, Chapter 12 of the Swiss Private International Law Act of 1987 applies "if the seat of the arbitration is in Switzerland." (10) Wording of similar effect is found in the English, (11) Dutch, (12) Italian, (13) and Swedish Acts, (14) to name just a few.

      In contrast, French law is often viewed as an exception. It is different, though less so than is generally believed. Article 1494(1) of the new French Code of Civil Procedure provides that the parties may "define the procedure to be followed in the arbitral proceedings," including the selection of "a given procedural law." This rule is a restatement of well-settled case law accepting that an arbitration held in France could be submitted to foreign law and vice versa. (15) For instance, in 1980, the Paris Court of Appeal decided that it had no jurisdiction to set aside an ICC award issued in an arbitration held in France because the arbitration was not governed by French law, neither the arbitrators nor the parties having expressed such a choice. (16)

      The drafters of the new arbitration statute adopted the following year did not follow the same course. On the contrary, they provided for the jurisdiction of French courts over set-aside actions directed at awards rendered in France. (17) This implies that even if a foreign municipal law is chosen to govern an arbitration, the arbitrators must comply with mandatory French rules of procedure as they are reflected in the grounds for setting aside the award. (18) In other words, even in France, the law of the place of arbitration, or of the award, submits the procedure before the arbitrators to certain minimum requirements such that the end result is identical to that in jurisdictions applying the objective or territorial test. (19)

   2. Though it Governs, National Law Has Less Influence Over Arbitral Proceedings

      Paradoxically, just as it became prevalent, national law lost much of its influence over the arbitral process. How has this decreasing impact manifested itself?. What are the reasons for it? Although they do not constitute an exhaustive list, two aspects arise to greater prominence: (1) the legal fiction involved in the seat of arbitration and (2) a growing consensus among national legal systems about general principles of arbitration procedure.

      1. The Seat of Arbitration is a Legal Fiction

         The place of arbitration, sometimes called the seat of arbitration, as a legal concept has become something of a fiction. There is no necessary connection between the seat of the arbitration and the physical, geographical location where the arbitral activities, primarily the hearings, are carried out. A number of considerations point to the fictional nature of the seat of the arbitration. First, it is generally accepted that hearings can be held in places other than the seat of the arbitration. (20) This is the rule under the Model Law, and under national legislation adopting it, as well as under recent non-Model Law statutes and most major institutional arbitration rules.

         During the drafting of the Model Law, one member state proposed requiring a "genuine link" between the "constructive" seat of arbitration and the "actual arbitral proceedings." (21) The proposal was not pursued and the provision was adopted without such requirement. This makes sense: the constructive place is often chosen for its neutrality, i.e., a lack of connection with either party, while the actual place of the hearing may be chosen for precisely the opposite reason, because there is a link to one of the parties, e.g. the presence of certain witnesses.

         Further, the physical location of the arbitral activities loses much of its weight when one considers evolutions in technology. Where does an online arbitration actually take place? "In cyberspace," would be a convenient answer, but it would be wrong. Cyberspace is a misnomer. There is no space; there are only telecommunication networks. (22) May one argue that the arbitration takes place where the participants access the networks? Though not wrong per se, this is highly impractical for legal purposes. In this context, the traditional concept of place is meaningless. If the territorial test is to stand, there is no choice but to rely on a place that is, in essence, a fiction arising either out of the parties' choice, or out of the arbitrators' decision.

         This...